China’s Energy Crisis: What Went Wrong?

China’s Energy Crisis What Went Wrong

What led to this energy crisis and what can Beijing do?

China is facing its worst power crisis in years, stemming from a coal shortage. Since August 2021, at least 20 provinces have been affected by power cuts of varying degrees. As the winter months are arriving, there are worrying concerns that further power shortages and blackouts could occur during winter, threatening to plunge millions of homes into darkness and the cold.

How did we get here? China’s power supply shortage has three major causes: its restrictions on the import of Australian coal; the government’s long-term plan to reduce carbon emissions; and a huge surge in global demand for Chinese exports.

Ban on Australian coal

Australia has the coal that China sorely needs; around 38% of Chinese thermal coal imports came from Australia. But since October 2020, Beijing has levied tariffs and enforced bans and restrictions on Australian imports, including Australian wine, barley and coal. 

China stopped buying coal from Australia—which used to be the biggest exporter of coal to the country—when Canberra supported a call for an international investigation into Beijing’s handling of the COVID-19 outbreak, which was first reported in the Chinese city of Wuhan. Beijing is unlikely to lift the import restrictions on Australia due to their steadily deteriorating political relationship. An estimated one million tons of Australian coal still remained unused in bonded warehouses along China’s coast.

China relies heavily on coal for power generation. As such, China has been looking elsewhere for coal supply to try and make up for the shortfall. Mongolia and Russia replaced Australia as China’s key suppliers of coal, but this had been curtailed by constraints, including logistics and regulations.

Tough government mandate to cut emission

China is the largest emitter of carbon dioxide (CO2) in the world, producing 2,912 million tons of CO2 in 2020, ahead of the United States’ 1,286 million tons and India’s 666 million tons. Experts have agreed that the global climate change crisis could not be averted unless China reduced its emissions.

In 2020, Beijing announced new Nationally Determined Contribution targets and measures. China aims to peak CO2 emissions before 2030 and achieve carbon neutrality before 2060. It is also working to lower its carbon intensity by over 65% by 2030 from the 2005 level. To achieve this ambitious plan, China would have to cut coal-burning to generate electricity by 2050.

Immediately, national and local plans have been kicked off to comply with the CO2 emissions reduction target by lowering the production of coal and other carbon-heavy processes. But such an abrupt over-correction in decarbonization and cutting down coal usage can lead to problems. In adhering to its long-term plan in lowering energy consumption, immediate issues, such as the inadequate supply of heat and electricity, may be overlooked and deprioritized.

Increased demand for Chinese exports

China has long been relied on as the world’s greatest exporter. As economies are opening back up post-pandemic, the global demand for Chinese goods has only intensified after two years of “deprivation”. Shipments from China in August this year surged at a rapid rate of 25.6% from 2020. To meet the global demand, the country’s already strained energy infrastructure faces a great deal of pressure. Guangdong, the major manufacturing hub in southern China, has experienced power outages due to high factory activity.

China’s energy crisis has not seemed to have improved, with coal and natural gas prices now at record high and temperatures are plummeting around the country. As we arrive in the coldest months of winter in China, the situation looks extremely dire. But there is still hope. If Beijing still intends on managing this crisis, it may need to quickly adopt new measures, perhaps by removing restrictions on its energy imports or even temporarily halting emission control targets in order to get access to whatever energy is at hand, regardless of emission numbers.

Header image courtesy of Unsplash

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